Ladies and gentlemen, thank you for standing by, and welcome to the Valvoline Inc. 2Q 2021 Earnings Conference Call. At this time, all participants are on listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to you speaker today, Sean Cornett. Thank you. Please go ahead, sir. Thanks, Christy. Good morning, and welcome to Valvoline's second quarter fiscal 2021 conference call and webcast. Valvoline released results for the quarter ended March 31, 2021, at approximately 5:00 P.M. Eastern time yesterday, April 28th, and this presentation and remarks should be viewed in conjunction with that earnings release. A copy of which is available on our investor relations website at investors.valvoline.com. These results are preliminary until we file our Form 10-Q with the Securities and Exchange Commission. A copy of the press release has been furnished to the SEC on a Form 8-K. With me on the call today are Valvoline's Chief Executive Officer, Sam Mitchell, and Mary Meixelsperger, Chief Financial Officer. As shown on slide two, any of our remarks today that are not statements of historical fact are forward-looking statements. These forward-looking statements are based on current assumption as of the date of this presentation, and are subject to certain risks and uncertainties that may cause actual results to differ materially from such statements. Valvoline assumes no obligation to update any forward-looking statements unless required by law. In this presentation and in our remarks, we will be discussing our results on an adjusted basis, unless otherwise noted. Adjusted results exclude key items which are unusual, non-operational, or restructuring in nature. We believe this approach enhances the understanding of our ongoing business. A reconciliation of our adjusted results to amounts reported under GAAP and a discussion of management's use of non-GAAP measures is included in the presentation appendix. The non-GAAP information provided is used by our management and may not be comparable to similar measures used by other companies. As we turn to slide three, let's review our financial results for the quarter. For the fiscal second quarter, Valvoline delivered reported operating income of $131 million, net income of $68 million, and EPS of $0.37. Year-to-date cash flow from operating activities was $190 million. The key items in the quarter were $27 million of after-tax expenses related to a new debt issuance and retiring our 2025 senior notes, non-service pension and OPEB income of $10 million after tax, and business interruption insurance recovery of $2 million. Excluding key items, results for the quarter included adjusted EBITDA of $152 million and adjusted EPS of $0.46. Year-to-date, free cash flow was $116 million. As we turn to slide four, let me turn the call over to Sam to discuss our results and operations in more detail. Thanks, Sean. Our results in Q2 were outstanding, exceeding our expectations and part of an exceptional performance in the first half of the fiscal year. Sales grew 21% in the quarter, and adjusted EBITDA increased by 38%, excluding large unfavorable changes in variable compensation and LIFO inventory accounting. We continue to benefit from decisions that we've made to drive growth. Q2 was the first quarter where Quick Lubes contributed more than half of our total adjusted EBITDA, as our strategy of shifting to a more service driven business model takes hold, supported by the strong cash generation of our products business. We're also benefiting from an improved macro environment, including stimulus and broader economic reopening. Our strong top and bottom line growth and outperformance so far this year gives us the confidence to raise our 2021 guidance. We now expect adjusted EBITDA to be $590 million-$610 million, representing high teens growth at the midpoint, and free cash flow to be roughly $260 million. Turning to the next slide. The top line improved across all segments in Q2. Quick Lubes and International each saw sales growth in the mid-30% range and adjusted EBITDA growth of roughly 60%. Core North America had solid top-line growth and had a 4% decline in adjusted EBITDA due to price cost lag, excluding a LIFO inventory accounting impact. Let's discuss Quick Lubes in more detail on the next slide. Quick Lubes had an outstanding quarter. Same store sales growth was more than 20%, with a balanced contribution from transactions and average ticket. Some of this growth is related to the onset of COVID-19 impacts in the H2 of last March. However, our normalized same store sales grew more than 10%, driven by our strong digital marketing performance and excellent in-store execution of a preventive maintenance model. Same store sales growth combined with unit growth of 9% drove a 34% increase in overall revenue. Top line growth and improved margins generated a nearly 60% increase in adjusted EBITDA, a truly impressive performance. Throughout the pandemic, our Quick Lubes business has produced impressive results due to our convenient, safety focused stay in your car service model, an exceptional performance by our team. Let's turn to the next slide to discuss how our broader menu of preventive maintenance services drives store sales. Key component of driving same store sales growth is ticket. One aspect of ticket that we pay particular attention to is non-oil change revenue, or NOCR, from our wider array of service offerings. These include OEM scheduled maintenance services, fuel system cleaning, battery changes, tire rotations, and ancillary items like cabin air filters and wiper blades. It is important to note that these services tend to carry exceptionally strong margin contribution. We continue to focus on ways of growing NOCR. Last year, we relaunched our battery change program. We moved to a different supplier and branded the batteries as Valvoline, matching the branding across the product lineup we use in our stores. This also gave us access to improved testing equipment for our store employees and better understanding of battery health for our customers. We invested in our supply chain capabilities to make sure that we had the right inventory in place at the right time. The result has been a near doubling of battery change service penetration in the first year. We completed the rollout to company stores in December and are in the process of expanding to our franchisees. As a result, we expect this service to be an important growth driver of NOCR in 2022. As a safety precaution, we suspended cabin air filter services in the early stages of COVID-19. We've begun reintroducing them and expect a solid contribution to ticket in the H2 of the year. Non-oil change revenue continues to steadily grow over time and currently makes up nearly 25% of average ticket. We have a tremendous opportunity to expand NOCR and increase penetration rates of these important services to drive ticket growth while expanding our customer base. Let's look at the other drivers of same-store sales on the next slide. Both transactions and average ticket drive same-store sales. We leverage our strength in digital marketing and data analytics to attract new customers and retain our current ones. We've grown our oil changes per day, a measure of transactions, at a healthy 3% CAGR over the last several years. This reflects the success that we've had growing our customer traffic and gaining share. In contrast to an upsell approach, we focus on educating our guests on what services their vehicles need based on the vehicle service history and OEM recommendations. This builds trust with our customers and, combined with the competitive advantages of our model, allows us to have pricing power, capture the shift to synthetics through premium mix, and grow non-oil change revenue. The multiple levers that we have to drive same-store sales give us the confidence and the sustainability of strong, long-term same-store sales growth. Let's review Core North America's results on the next slide. Progress in Core North America continued in Q2. We have passed through raw material cost increases to our index-based accounts. We have also successfully completed the first phase of pricing to negotiated accounts. Raw material costs have increased significantly since our Q1 earnings call. While we will execute price increases in Q3 and Q4, we also expect short-term margin pressure from the price cost lag effect. Unfavorable price cost lag caused a decline in segment EBITDA. A significant component of the decrease was the impact of LIFO inventory accounting. Excluding the LIFO impacts, year-over-year gross profit was up slightly, and adjusted EBITDA was down modestly. Overall volume was up 7% year-over-year despite significant cost and pricing pass-through pressure. We saw growth in both channels. DIY retail channel volume continues to outpace miles driven. Growth is coming from continued progress in traditional DIY outlets and from new distribution where we've been under-penetrated historically. We're making good progress in gaining more shelf space in farm stores, C stores, hardware, and online. Our focus in the DIY category is on working with our retail partners to market and merchandise our brand. Innovation, particularly in synthetics, is a key part of that strategy. For example, we recently introduced FlexFill packaging for our synthetic gear oil. We have received great feedback from consumers and customers, and early sales results are strong. Valvoline is the number one brand in transmission fluids and gear oils, and FlexFill further strengthens our position. In the DIFM space, demand is recovering more slowly than in DIY. Our focus remains on helping our installer customers drive value. Our success is demonstrated by the fact that we have extended or renewed long-term agreements with many of our key installer customers. We also continue to win new business and our volumes continue to outpace miles driven. We are well positioned to see the benefits as the market recovers. Let's review international results on the next slide. The international segment delivered another impressive quarter of growth across all regions in Q2. Sales and volume were up in the mid to high 30% range, led by Asia Pacific and particularly China, which had the largest COVID-19 impact in Q2 last year. Top line volume growth was driven by our marketing programs and new distribution, which led to market share gains. We continue to add new distributors in all regions, building channels, and expanding market coverage. In general, we saw improving market conditions and some distributor restocking impacts. We're closely monitoring the impacts of rising COVID-19 cases in India and other parts of Asia. Adjusted EBITDA growth of 63% was driven by strong volume growth in both affiliates and JVs. Raw material cost increases impacted Q2 and are expected to continue across all regions. We expect margin pressure to increase in the near term as we work to pass through these increases. On the next slide, let's take a closer look at one of our marketing programs that helped drive brand awareness and strong volume growth in the quarter. Along with channel building and service platforms, building our brand is a key element of our international growth model. A key pillar of our brand building efforts is our global Mechanics' Month program, which took place across more than 50 countries, including the U.S. and Canada, in March. Valvoline has proudly supported mechanics with a variety of programs, including training and professional development throughout our history. The 2021 campaign focused on recognizing the work mechanics have done to keep our economies going. Their critical efforts kept essential service workers moving to help those in need as the world manages through COVID-19. The program saw significant engagement across multiple channels, as well as direct retail activations with signage and promotional materials in mechanic shops. In the end, all elements of the event were focused on recognizing mechanics and driving customer visits, helping deliver a record volume month in International in March. Let me turn it over to Mary to review our financials. Thanks, Sam. Our adjusted results for Q2 are shown on slide 12. Year-over-year growth in sales of 21% was led by international and Quick Lubes. Acquisitions and favorable foreign exchange added 500 basis points to sales growth. The 60 basis point decline in gross margin was primarily the result of year-over-year changes in LIFO inventory accounting, driven by raw material cost changes, which were declining last year and have risen this year, primarily the result of impacts from the global pandemic. Most comparable peers use a FIFO accounting approach. We believe excluding the non-cash LIFO impact is important to better understand the underlying business performance and for better comparability. The increase in SG&A was primarily related to changes in variable compensation as we significantly reduced variable comp accruals in Q2 last year due to the pandemic, driving a $21 million year-over-year change. The remaining increase in SG&A was driven by acquisitions, inflation, increases in advertising and marketing, and foreign exchange impacts. In Q2, Quick Lubes made up just over half of our adjusted EBITDA for the first time. This favorable segment mix, along with top-line growth and a higher contribution from unconsolidated joint ventures, resulted in a 13% year-over-year increase in adjusted EBITDA to $152 million. Excluding the unusual LIFO impact and variable compensation changes, adjusted EBITDA grew 38% and adjusted EPS grew 49%. Let's move to slide 13 to discuss the balance sheet and cash flow. We continue to generate strong cash flow with year-to-date cash flow from operating activities of $190 million. CapEx totaled $74 million, leading to free cash flow of $116 million. Our discretionary cash flow, defined as operating cash less maintenance CapEx, was $175 million. 80% of our year-to-date capital expenditures were growth-related investments, which is our highest priority for allocating capital. The cash generative nature of the business and its capital light maintenance needs allow us to focus on and self-fund our growth while also returning cash to shareholders. In Q2, we returned $65 million in the form of dividends and share repurchases. Interest expense was $55 million in the quarter, including $36 million of costs related to calling our 2025 senior notes and issuing new longer-term notes, part of our efforts to reduce growth leverage and lower interest expense. We had debt redemption costs in Q2 last year as well. Net interest expense, excluding the cost associated with these bond refinancing transactions, would've been $19 million in each quarter. Let's move to the next slide to review our updated outlook. We are raising our guidance. Based on our outstanding performance in Q2, we now expect same-store sales growth of 18%-20% and normalized growth of 9%-11%. This projected same-store sales performance, combined with anticipated strong store additions and ongoing strength in international, is expected to generate overall sales growth in the low to mid-20% range. Strong H1 results and the flow-through of higher top-line growth to profitability is anticipated to generate adjusted EBITDA of $590 million-$610 million and adjusted EPS of $1.72-$1.82, which would translate to year-over-year increases for both metrics in the mid-teens to 20% range. The increase in earnings, improved cash conversion, and lower than anticipated cash taxes are expected to drive free cash flow of $250 million-$270 million. Now, let me turn things back over to Sam to wrap up. When we first gave our outlook for fiscal 2021, we anticipated this year to be an inflection point for growth. Based on our progress so far and our updated guidance, we remain convinced of that expectation. QuickLube should make up half or more of our adjusted EBITDA as our investments in store growth and improved operations continue to deliver benefits. Importantly, QuickLube's high margin, high growth profile continues as it becomes the biggest segment in the company. At the same time, supply chain enhancements and investments in brand building are generating growth in international, and we continue to generate strong cash flow in Core North America as well. The Valvoline team is working incredibly well across businesses and functions to drive growth and bring innovative solutions to our customers. This gives us the confidence that we have the right plans and capabilities to deliver high return growth in the years ahead. With that, I'll turn it back over to Sean to open the line for Q&A. Thanks, Sam. Before we go to Q&A, I'd just like to remind everyone to limit your questions to one and maybe one or two follow-ups. With that, Christy, please open the line. Your first question comes from the line of Laurence Alexander with Jefferies. Good morning. I guess two quick ones. Can you give a sense for the raw material pass-throughs in both your Core business and the international JVs? Where would EBITDA be if at the current run rate of business, if you fully caught up on the known pass-throughs? Secondly, can you talk a little bit, give a little bit of perspective on the longer-term target for the mix of non-oil change revenue per tech visit? Do you see sort of the CAGR slowing down after it crosses a certain point, or does it become more difficult to layer in additional services? Yeah. First, Laurence, with regard to the cost increases, as I noted, they have been quite significant. We've had particularly base oil cost increases over each of the last four to five months. What we see as we progress through the fiscal year is that we'll be taking a series of price increases to the negotiated accounts both in the U.S. and international. While we expect to recover those costs over time, we will feel a price lag impact in the business, in particular, more in the DIY retail channel where we've got scheduled promotions throughout the spring and summer period. We have to have a balance between how hard do we push on price, the timing of those price increases with protecting those promotions, which are important to continuing the volume momentum that we have in DIY right now. We will feel some lag impact but nonetheless when we take a look at our forecasted unit margins in Core North America, international, we'll see certainly some pressure in Q3 and Q4, but we do expect to be in pretty good shape as we start the new fiscal year. As you know a lot of our volume, particularly on the installer side of the business, is based on negotiated index pricing and so that pricing adjusts automatically every quarter so we really get very little lag impact on that side of the business. That's where we stand from a margin perspective. We'll feel some pressure there. Last year, of course, we had the opposite effect where we had tailwinds of falling raw material costs. This year, we're seeing that shift back in part of rising crude. The weather impacts from February has had some disruption effects in the base oil and additive supply chain, which has put additional pricing pressure, cost pressure on us. Hopefully as we progress towards the end of the year, we'll see some of those pressures subside. With regard to the Quick Lubes business and non-oil change revenue, calling that out because it is a really important lever for driving same-store sales growth. It's one of many levers that we have to drive same-store sales growth, and it's one that we're very much focused on. We see a lot of opportunity for growth in the years ahead. While we've seen some nice progression, especially in the last couple of years, been really pleased with that, there's still quite a bit of an upside. I highlighted the battery service, which we're paying particular attention to. We've made some investments there. We're seeing some really strong early results, but we're really teeing that up for big contribution in fiscal 2022. It's not just battery service. What we've found is that our customers, when we present our services and the OEM recommendations properly, because of that trust that we have with our customers, we're able to capture more of those services that are truly needed on those vehicles. This is really key to our long-term strategy, better penetrating the service opportunities that we have with our existing customer base, leveraging the technology, leveraging investments that we've made in understanding vehicle's maintenance history, combined with the OEM recommendations, combined with effective presentations. It's a powerful lever for driving that ticket growth over time. Okay, great. Thank you. Your next question is from the line of Simeon Gutman with Morgan Stanley. Hey, guys. This is Michael Kessler on for Simeon. Thank you for taking our questions. Michael. I wanted to ask about, yeah, morning guys. I wanted to ask about the guidance, the raised guidance, just I guess relative to our expectations, maybe the Street too, the increase to guidance still trails a little bit the magnitude of how much you guys outperformed in Q1 and Q2. I just want to ask about that, the puts and takes as far as your expectations for the back half. Seems like Quick Lubes has kind of outperformed and should probably continue to trend maybe better than expectations earlier in the year, but you have some profitability, a little bit more uncertainty on the Core North America side. Just if you could talk through that and I guess, is that kind of right way to think about the back half? Is there an implication as far as how those are going to offset going forward? Thank you. We're pleased to raise guidance and a lot of that is from the strength that we saw in the H1 of the year. Most importantly, it is the continued strength in the Quick Lubes business. We fully expect the Quick Lubes business to perform very strong in the H2 of the year. Obviously, the same-store sales growth that we saw, even on a normalized basis in Q2 being double digits, we're seeing that momentum carry into the beginning of Q3. That is our biggest profit driver. It's important to note too, though, that the international business has been delivering outsized growth over the last couple of quarters. We're excited about that, and the fact that we're seeing growth across all of our regions tells us that some of the investments that we've been making in building our capabilities on the supply chain side, building our channels to market, strengthening our distribution, strengthening our teams, that this is a business that is going to deliver sustainable growth into the future. However, the top line growth was exceptional, and we do think there is some benefit to the COVID-19 recovery process where we benefited from inventories building back up. I would expect growth in the international business to continue for sure into the back half of the year, but not at the same rate that it contributed to the H1 performance. Back to guidance then. You've got very strong performance coming from QuickLube. International will continue to be good, but it will feel a little bit of that price lag impact because raw material costs are rising across the product business. Core North America will be a bit more challenged as we execute pricing and we'll feel some price lag effect in the back half of the year. All in all, adding up to just a truly phenomenal year for the company. Yeah. The other thing I would add to that, Sam, is we are monitoring carefully some of the increased incidents of COVID that we're seeing in India where we operate a joint venture with Cummins, as well as in some parts of Asia, where we have a strong business within the International Segment, and we expect that to create some additional pressure in the back half of the year. We are concerned about our teams in India and, certainly, hopeful that they'll be able to get ahead of this rise in their COVID incidents and be able to see some of the improvements that we've been seeing here and experienced in the U.S. and other parts of the world. That also has a little bit of a negative outlook for us in relationship to the back half of the year in terms of our guidance. Yep. Got it. I was actually just about to ask about India. Thank you guys for addressing that as well. I guess one other question on Quick Lubes and thinking more, I guess, bigger picture, longer term about the mix over time as far as where the EBITDA is coming from. I think you guys have had the majority being generated by Quick Lubes out there as a target for a couple of years now, I think going into really next year. Is there any updated thoughts on where that could go in the next two to three years? Has any kind of thinking changed given what we saw this quarter with a record high as far as the mix of Quick Lubes? Yeah. The good news is that the trends that we see in Quick Lubes, we definitely feel that they're sustainable. So we're bullish on the long-term performance of the business as it relates both to the same-store sales growth, where there's just tremendous leverage and value in how we care for our customers and how we capture more of the service opportunities with those customers and continue to build market share. That's number one. We're also building market share by adding more stores, and we've got three important levers for adding stores. We've been investing in new store growth, and they're beginning to contribute significantly this year, and even an expanded contribution in fiscal 2022, making acquisitions, and then working with our franchisees on their growth programs too, to make sure that they're adding stores and we're positioning ourselves to reach more and more households. Long-term growth looks good, and we're very confident in that. We are looking at those long-term forecasts, and we look forward to providing updates on that in the near future. Hopefully that helps. Yes, it does. Thank you very much, and good luck the rest of the year. Your next question comes from the line of Stephanie Benjamin with Truist. Hi, good morning. Good morning, Stephanie. I had just a quick follow-up from an earlier question, Sam, you kind of walked through unit margin expectations for Core North America, I just wanted to confirm your thoughts as you look at unit margins in the back half of the year. Just given what we're seeing with the rise in base oil and just the price lag impact, we really shouldn't see that return to your target, call it high threes, low four unit margin until really early next year, meaning early fiscal 2021. I'm sorry, early fiscal 2022. Is that the right way to think about it? Yes, Stephanie. In terms of the margin compression we'll see short term from the price cost lag in the Core North America business, we do expect it to be a more significant impact on margins in the back half of the year, given the recent increases that we've seen in base oil costs. Having said that, if you look at our forecast for the back half, excluding the impact of the LIFO changes, we actually think that we're going to be in the high threes. Yes, we'll see a full recovery into the H1 of next year as we're able to get our pricing through over time here in the next six months. With the impact of LIFO, it'll be lower than that, but without the non-cash LIFO impact, which had a significant difference this year versus last year, given the shorter-term decline in costs last year with the increases that we're seeing this year, excluding that LIFO impact, we expect to be in the high threes. Great. That's really helpful. Then switching gears, I'd love to hear your thoughts on some of the underlying industry growth that you're seeing, both in Quick Lubes and North America. If you could kind of frame how you think your Quick Lube business has performed. You called out a low double-digits on a normalized basis with Quick Lubes, how you think that compares to what's going on in the overall market. Then also in Core North America, particularly looking at the DIY channel, I think another quarter of unit growth. Where do you think the industry is at the moment? Was there a more favorable comp in March just as we lapped the pandemic? What's your outlook going forward just from industry growth in Core North America as well as how you're outperforming with Quick Lubes? Thanks. Yeah. I'll address Core North America first, then come back to Quick Lubes. In Core North America, what we've seen over the past year and the COVID impact is that DIY has remained pretty steady in terms of overall category demand has been very solid. We've seen that in our results, too. That's been really encouraging. On the installer DIFM side of the business, that's where demand has been off pretty substantially, probably in line with miles driven. If you look over the last 12 months, miles driven has been off around 10% versus normalized drive. If you go back to comparing to 2019, for example. The industry and segment has definitely felt that. We've been outperforming the overall industry, I think, in terms of how our volume has held up. We think as miles driven begins to improve in the U.S, that installer channels will start to benefit from improved traffic. That will create some opportunity to start to see more consistent growth in installer channels in the back half of the year and into 2022. That's how we see Core North America in terms of the industry outlook is very much influenced by miles driven with DIY, again, healthy versus installer, which has, of course, been hurt more. Regarding Quick Lubes, though, obviously, we've been growing share for quite some time. When you look at our same-store sales performance over the past year, where miles driven has been off 10%, but yet our traffic continues to be up, we're taking share. It's certainly within Quick Lubes, we have a business model that outperforms our competitors pretty substantially. When you look at the traffic, the car counts that we have, I mean, our stores are roughly 50% more productive than the industry average in Quick Lubes. It's because of the investments that we make in our people and the customer experience and the digital marketing capabilities. The data analytics behind digital marketing continue to get better, and they really benefited when we look at this past year of our ability to attract new customers, new trials to our stores has been really strong, in addition to the strong loyalty that we have. It's that combination that gives us the ability to keep driving market share within our existing footprint. On top of that, of course, adding the new stores. Performance of Quick Lubes and the ability to attract new customers as consumers look for more and more convenience, we're in a really good position there. When we look at breakdown the new customer growth, yes, part of it is coming from other competing Quick Lubes, but we're capturing much from the broader DIFM industry. That includes tire and repair, even customers shifting over from car dealers and as DIYers become DIFMers, we're in a really good place to capture that business. We shared in the past that our market share is only about 4% of the do-it-for-me oil changes out there. A big part of our strategy is growing that market share, reaching more households. Of course, the benefit of driving the services that we talked about in the non-oil change revenue presentation today. It's exciting to see the dynamics and how well positioned we are with this business. Absolutely. Thank you so much for the color. You bet. Our next question comes from Jeffrey Zekauskas. Thanks very much. It looks like base oil prices went up $0.40 a gallon this week, not at Motiva, but at everybody else. Is that incorporated in your guidance, or how do you read the current movement in base oil prices? Yeah. Hi, Jeff. Good morning. Yeah, we did see an increase in base oil costs ranging from 30%-40% depending on. Excuse me, $0.30-$0.40, depending on the grade. We've considered that in relationship to our guidance, and we believe that our guidance is still appropriate with the raise that we provided, even with the impact that we might see from that recent change. It's likely to have a impact more toward the end of our fourth quarter. As Sam mentioned, it might take us a little longer to get all of our pricing through and into the first quarter of next year. That is fully considered in terms of our updated guidance, Jeff. Okay. When I look at your waterfall charts, I don't see a raw material element, where you say raw materials did this or that. Maybe in the future you might include that. My last question is, you bought 16 stores in Texas. What did you pay for that, and what was the multiple of EBITDA? Sure. We recently announced a transaction to convert 16 franchise stores to company-owned in a market where we've been investing in building a strong company-owned presence. It was the last kind of outlier, and we believe there are substantial opportunities for us to leverage our field sales force and our marketing across company-owned stores by concentrating that market in company-owned stores. We typically see a really strong mid-teens return outlook, and we typically pay from a price multiple across most deals that we do in the high single-digit range before synergies that we can bring to the business. That's consistent with this most recent acquisition as well. On your first question on the waterfalls, we break out volume mix from margin, and we started to break out the LIFO impact as well in those waterfalls. That margin impact is primarily related to the price cost lag on the waterfalls, Jeff. Okay, good. Thank you so much. Your next question comes a line of Chris Shaw with Monness, Crespi. Hey, good morning, everyone. How you doing? Good morning. I was trying to parse out. With the higher ticket, the non-oil change piece, and I guess the sequential improvement in same-store sales, do you have a sense how much you benefit from stimulus checks? I just thought maybe the non-oil change ticket piece might be people spending the little extra on because they have more money in their pockets or Do you have any sense of that? I mean, do you do any work around that, any survey work or I'm not sure how you would actually be able to figure that out, just curious. Yes. No, it's a great question, and we do try to understand the different impacts and what that benefit has been. With regard to non-oil change revenue, though, we've seen a pretty steady progression, and it wasn't like there was a big pop in non-oil change revenue performance with the ticket, so that all of a sudden people felt like they could afford more services. We think it's more dependent on how consistent we are and how effective we are at presenting the services that our customers are due for. We think it's more in our control. That said, both in January and in April with the stimulus checks, that did provide a boost to our overall traffic. We think it's been very helpful to us. When we think about the health of the consumer right now and miles driven beginning to improve, I mentioned over the past 12 months, we've been down roughly 10%, but if you look at over the last month, the last four weeks or so, we're looking at fuel sales being down in the 3%-4% or 5% range versus 2019. I think we're close to seeing miles driven return to normal. As people look to hit the road this summer, I think some of that pent-up demand, we're always busy before the driving holidays of Memorial Day and July 4th. I think it's going to be particularly exciting and challenging for our stores to keep up with the volume that's coming their way this summer. Feel really good about that. Yeah, Chris, the other thing I would add is, we certainly do think we saw benefits from stimulus, but even as we move further out from consumers receiving those checks, we continue to see really strong momentum. I do think there's the miles driven impact and the reopening combined with our incredibly effective marketing, and customer satisfaction with our service levels and convenience is continuing to drive really strong demand. Thanks. Sam's commentary on the upcoming driving season being pretty robust made me think of a couple of things. One, I forget, can you see the wait times at your retail locations on the app? Yeah. The app which provides consumers the opportunity to see what the expected wait time would be before they come to the store, that is a program that's in place for all of our company stores. It has been for the past year now, and now it has rolled to our franchisees. Now, fortunately, across all of our markets, consumers can download the app and see what those wait times are before they get to the store. There's a lot of benefits, of course, to the consumer. They can target the timing of their trips to the store or even decide that if their store closest to them has a 20-minute wait time, but a store that might be a couple of miles down the road in another direction has no wait time, they may decide to go to that store. It actually works to our benefit, too, in helping spread out the demand, particularly during the busiest times of day. There's a real nice benefit there. We're excited about the fact that it's now rolled across the whole system. This app, we're still in the process of bringing more and more customers onto the app as we bring more value to the app for the consumers to use that as a way for convenient transactions with Valvoline. It's an exciting new tool for us, and we hope to report on some really good progress in the years ahead. What's your strategy if you get really busy in a location or in a market and wait times are up a lot, is it easier for you, or what's the strategy? Do you add bays at a certain location, or would you just add another location if you could, either through a franchisee or yourself? Yeah, it's interesting in that some of our top-performing stores show us that we have a lot of capacity within our existing stores to handle more customers. When you, say, look at the top quartile of our stores, they do well into the 60 oil changes per day. The number of transactions that they're doing compared to an overall system-wide average, just under 50. There's plenty of capacity in the stores. We also see that some of our top-performing stores can do both very well on transactions and tickets. It's not a matter that we focus on volume over ticket and these other services. We can do both. That said, we're looking to fill in and add stores where there's opportunity. When you have stores that are at the high end of transactions, we know that typically there's going to be an opportunity to add another store in that neighborhood where the market has been expanding. There's plenty of opportunity for us to continue to add stores and better penetrate the market. As I mentioned, we really only have a four share of that overall DIFM market when it comes to oil changes. We do have the best model, and so where do we add these stores, and so that we're growing at a steady pace to better reach more and more households. We've invested and been developing a very sophisticated real estate model that gives us the confidence when we add a new store of that store being well above average in terms of its potential for growth. As we've been penetrating new markets, Mary talked about our investments that we've been making in Texas. We're also looking at the historical corporate markets and looking for those fill-in opportunities and making sure that we're making those investments too, and working with those franchisees on their fill-in opportunities, which, of course, are significant. The opportunity for store growth is a long-term opportunity for us. This year, we're going to be adding I think at the high end of the guidance that we gave, 140-160 new stores this year with the combination of new store builds, franchise growth, and the acquisitions that we've made. We want to be adding more than 100 stores every year. Great. Thanks so much. Our next question comes on the line of Wendy Nicholson with Citi. Hi, good morning. A couple questions. Mary, just a follow-up on India. Can you remind us how big India is for you? Given the joint venture structure, is it disproportionately profitable for you? If things get worse there, how much should we worry about that? That's my first question. Sure. We don't provide detailed specific disclosure, but if you look at the overall international business, we're talking about historically India providing mid-teens to 20% of the overall profit contribution. International overall contributes 20% or so to the overall business. It's a smaller percent, but it can be a few million dollars if we continue to see degradation there because of the shutdowns with the rise of the incidence of the pandemic there. It could have a small impact, but not material. Perfect. Okay. Also, Mary, maybe for you, just in terms of the VIOC business, how much are you still spending on PPE, the elevated COVID costs? I know you do a great job, and a big priority is keeping people safe, but are you beginning to see that abate just as people get vaccinated? Just wondering as we look at on a normalized basis, your margin expansion, your emerging trends are good, but can they get even better as some of that extra or incremental spending maybe fades away? Yeah, we've already seen significant improvements in some of the labor spending related to quarantining because of the substantial reduction in the COVID incidents. We had unproductive labor we talked about in the first quarter, and certainly last year, as we were ultra-cautious with our teammates to ensure if there had been any exposure to someone who had tested COVID positive, that we paid those teammates to quarantine and move people around. That has substantially abated. Having said that, we think it's the right thing to do to continue to invest in PPE for our teammates, and I expect that to be a continued part of our ongoing operating expenses as long as we see active COVID incidents. Keeping our employees and our customers safe continues to be a very high priority for us, Wendy. The unproductive labor costs have substantially been eliminated. Terrific. Then, if I can, sorry for asking so many, but Sam, on the NOCR business, I know historically part of your strategy from a marketing perspective has been to email people, "Hey, it's been six months," or, "Hey, we think you've probably driven 10,000 miles. Come back in." So the marketing has been really heavily oriented towards the oil change side of things. Do you think there's an opportunity to broaden that or expand that, or is there a risk in sort of walking too far away from the historical oil change heritage? Just from a marketing perspective, how do you get the message out that, like, "Hey, we offer so much more? Yeah. Marketing to our existing customer base is very sophisticated because we have so much data. We have their service history. We know how many miles they travel. We know when they typically come in for oil changes on a miles basis or time basis. With those loyal customers, we definitely market to them with regard to the other services that they're due for. That kind of helps set them up for the presentation when they come in. They may not appreciate that their OEM or Ford, Toyota, et cetera, are recommending that their cooling system service happens every 40,000 mi, 50,000 mi, but we will provide that email reminder as to what the service is about, why they need it, and then they'll receive that presentation in the store. It's part of our marketing program. Of course, there'll be a discount attached to that, too, which kind of tees them up again for saying yes to that service, getting that service taken care of at Valvoline, where they typically are going to save money versus going back to a dealership. Marketing in ways that benefit Ticket is part of our overall approach. When it comes to attracting new customers, that marketing is more about maybe initial savings to have them try Valvoline with the communication around our stay-in-your-car service and the convenience of our service. That's more geared towards transactions, whereas the existing customer base is both reminding them it's time to come in, but also making sure they have the message on the other services. Terrific. Thank you so much. Sure. Once again, ladies and gentlemen, that is star then the number one for any audio questions. Your next question comes from the line of Michael Harrison with Seaport Global Securities. Partners. Hi, good morning. Congrats on the strong quarter. Hi, Mike. Thank you. Going back to this battery change offering, I think of that as being a service that's relatively expensive compared to a filter change or a light bulb change or something like that. Does that service still bring the more attractive margin that you suggested? Should we think of it maybe more as a good margin on a dollar basis, but maybe more dilutive on a percentage basis for that specific service? It's really a strong margin, both on a percentage basis and on a dollar contribution basis. Like you said, people do understand their battery. They don't pay particular attention to it, though. We're in the process of making sure that our customers know that we provide that battery service and that the investment that we made in improved testing equipment, it's equipment that's only available in Valvoline stores, allows our customers to see their progression or degradation of their battery over time, which we think will lead to more transactions for us when their battery goes from, say, green, yellow to red. Batteries essentially have to be replaced every four to five years. We want to be in position to capture this very high $ service opportunity with excellent margin. I can tell you it's something I pay attention to living in a northern climate. You don't want to have a battery die when it's super cold out. That's right. Other question I had is about the marketing efforts. Obviously, the digital marketing has been very effective in bringing in new customers and helping with retention. Are you going to be increasing your marketing spend in either the Core North America or Quick Lube segments, given the strengths that you've seen in your overall earnings in the first half of the year? On the Quick Lubes front, the plans that we put in place at the beginning of the year are the plans that we're executing, so we're not expecting to see, say, an increase in those dollars versus what we had planned. If you look historically over what we've been spending on a per store basis, that has gone up over time as we've discovered new marketing programs that can help drive traffic for us. We've been making those investments. On a% of revenue basis, that has not been increasing. We're in a really healthy place with our marketing spend. I think that will continue to be the case. We might see small incremental increases in a dollar per store basis. Really, not seeing it grow as a% of revenue. We should get some leverage on these programs. In fact, that's what we look for in these programs, is a really high return on investment. Typically, in the Quick Lubes space, those incremental dollars are paying out within the year. It's different than, say, a traditional advertising spend where the payout is over multiple years. We see that return on investment within the year because of the new traffic that we're generating. We've been continuing to learn and invest appropriately in that side of the business. The marketing spend in Core North America is important, particularly in the DIY side, particularly to our long-term brand health. Yet we've been more steady with that spend. Increased levels versus the depths of the COVID impact, if you go back to last year. We're more at a normalized spend in fiscal 2021 for that business. We're pleased with the progress that we've been making and just our consumer marketing approach that I think is helping the performance that we've seen in the DIY channel this past year. Mike, I'd just remind you, last year during our third quarter, we did pull back pretty hard on spending, both kind of across the board, across all three segments, as we didn't think that marketing into an economy that was substantially shut down across the globe was going to be very effective. Year-over-year, we'll be seeing pretty significant increases in our marketing back to more normalized levels as a percentage of sales based on what Sam says. Just a reminder, if you just look at balance of the year-over-year comparisons our advertising will be up for sure for the balance of the year. All right. That makes sense. Thanks very much. Ladies and gentlemen, this does conclude today's Valvoline Inc. 2Q 2021 earnings conference call. You may now disconnect. Thank you.